Credit card debt in the Uk today - Essay Example

The building society branch network was expanded at high pace in the 1980's in the United Kingdom. But facing the recessions in the 1990's the trend declined. Most of the societies rationalized their network in order to cut the cost. The new trend was to give importance to the quality rather than quantity. This in turn gave rise to the trend of targeting high profit customers in order to gain high profits by cross- selling products to these customers. (Birkin & Clarke, 1998) The main customers of the building societies are the common men.

Most of the products of building societies as discussed above are designed while keeping in view the needs of household customers. These products are attractive for them because the way to use them is simple. Like all the commercial banks the building societies also offer the Credit card services which have easy terms and conditions and provide the customer with the facility of loan. These credit cards are also different according to the packages they provide such as The strength of U.K financial system largely depends upon the external shocks the banks have to suffer.

In the year 2005 the U.K banks financial strength ratings were comparatively high as compare to rest of other international banking institutions. The composition of the earnings of the banks kept reshaping. The income indicated a declining trend of retail borrowing, although offset by revenues from corporate banking than that from retail lending. Some banks in wholesale markets also gained dealing profits. It is future forecast, that the banks will earn nominal profits in coming year. Due to the unsecured lending exposure some of the banks would have slower income growth.

The competition in the banking industry and the declining trend of retail rending can result in a slow income growth capitalisation.The capital ratios in major UK banks remained unchanged i.e. above regulatory minimum balance required.Passing the stress tests the banks had sufficient profits and reserves capital despite facing various economic and external, shocks. The IMF (FSAP) report stated that despite all the worst case scenario combined together the total cost for the banking sector is just 0.

35 % total assets. (Bumn et al, 2005)The level of bad debts in UK is triggering at high speed as debt provision has been made easier to consumers in shape of credit cards and other financial instruments. The issue has become an important concern for the economists in the banking industry of UK. In the UK, bad debts are on average about 3 per cent in the credit card market, compared with the present level in the US of about 5 per cent. If the UK follows the US trend, credit standards may decline as competition increases.

These societies also provide consultation services to the customers since most of them are busy with their business or family lives to dedicate sufficient time to plan for their financial futures. Without adequate planning financial goals may be unrealistic, which can result in significant financial under-achievement. They often get teamed up with other legal companies in order to provide the customers with a comprehensive range of value for money insurance products to protect home, contents, and mortgage